TMI Blog1994 (2) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee responded by filing an estimate in Form No. 29 declaring nil income and consequently nil advance-tax. In filing this estimate the assessee-company took into account the loss of Rs. 16,87,520 for the assessment year 1984-85 as per return filed on 18-6-1984 and the loss of Rs. 3,38,860 for the assessment year 1983-84 as per return filed on 21-7-1983. The ITO completed the assessment on 11-1-1988 determining the total income at Rs. 45,85,583. He initiated proceedings for the levy of penalty under section 273(2)(a) of the Act on the ground that the assessee filed an estimate of advance-tax which it knew or had reason to believe to be untrue. After considering the explanation of the assessee he imposed a penalty of Rs. 2,10,533. 3. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anticipated that the interest on advances would be assessed on accrual basis though its method of accounting in respect of such interest had been changed from accrual basis to cash basis. In this connection it was pointed out by him that in the assessment year 1984-85 the change in the method of accounting for interest was not accepted by the departmental authorities and this position should have put the assessee on guard. He further submitted that the assessee's explanation is a mere self-serving statement which should not have been accepted by the CIT(A). 5. The Ld. Representative for the assessee on the other hand submitted that the estimate showing nil income was filed bona fide on the basis of the position obtaining at the time of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative for the assessee further drew our attention to the noting made by the assessee's employee in the demand notice issued by the ITO under section 210 of the Act to the effect that the profit of Rs. 13 lacs (approx.) for the year will be wiped out by the loss of Rs. 16,87,524 claimed in the return for the assessment year 1984-85 and therefore nil estimate may be filed. This noting, according to him, showed that the position obtaining at the time of filing the estimate was kept in view by the assessee and it was only on that basis that the estimate was filed. Under these circumstances, according to him, the estimate cannot be considered as untrue and the assessee cannot be held guilty of having knowingly filed a false or untrue es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appeal and that would wipe out the income. These returns were filed earlier to the filing of the estimate. The assessments for those years were completed subsequently. Those assessments had resulted in a loss for the assessment year 1983-84 but a profit for the assessment year 1984-85. The question now remains as to whether the assessee was justified in its belief that there would be a loss for the assessment year 1984-85. In the return for that year the assessee had claimed bad debt or trading loss of Rs. 21.57 lacs. That was disallowed in the assessment but the assessee kept the issue alive by taking it to the Tribunal. In the accounts for the assessment year 1984-85 the amount had been written off. The amount represented money paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antile to cash had been accepted by the Tribunal showing that the claim was not a hollow one but was prima facie tenable. Therefore, the assessee was justified in its belief that the interest cannot be taxed on accrual basis. All these facts existing at the time of filing the estimate would go to show that the belief that there would be no income for the year in question on which advance-tax would be payable was a reasonable belief and that the assessee had taken care to base its estimate on the data and position available at that point of time. Far from showing lack of bona fides on the part of the assessee or a guilty state of mind, the facts show that the estimate was filed bona fide. Even the noting made on the notice under section 210 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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